Recently, the first quarter reports of overseas e-commerce giants have been gradually disclosed.
21st Century Business Herald reporters selected three representative overseas e-commerce giants for analysis, namely Amazon (AMZN), eBay (eBay), and Shopify (SHOP). Against the backdrop of global economic uncertainty, weak consumption, and geopolitical tensions, e-commerce giants still achieved growth at the beginning of 2024.
Behind the growth is the efforts made over the past year to reduce costs and increase efficiency, such as multiple rounds of layoffs and business adjustments. At the same time, facing the impact of foreign e-commerce platforms such as Temu and SHEIN, various home appliance giants have also taken active measures to address market challenges and competitive pressures, deepen their moat, and establish new competitiveness, including improving user experience and empowering with artificial intelligence technology.
It is widely believed in the industry that new attempts by various enterprises have great potential and have brought about small-scale growth, but whether they can ultimately support the overall performance still depends on their future performance.
Growth under the impact of the overall environment
In 2024, the pressure of overseas inflation still exists, and sustained inflation may lead to a decrease in consumer purchasing power. Consumer confidence continues to decline, and the overall environment faced by e-commerce sales is not optimistic. However, after a full year of cost reduction measures in 2023, various home appliance platforms still achieved growth at the beginning of 2024 under the heavy pressure of the overall environment.
In the first quarter report, Amazon's growth was particularly impressive. Financial report data shows that in the first quarter of this year, Amazon's net sales reached $143.31 billion, a year-on-year increase of 13%, and its net profit increased to $10.43 billion, a year-on-year increase of 229%, both higher than market expectations.
Among them, North America contributed $86.3 billion in sales, a year-on-year increase of 12%; The international business sales reached 31.9 billion US dollars, a year-on-year increase of 10%.
Part of the reason for Amazon's profit growth is due to extensive cost reductions, adjustments in business performance, and stable cloud spending. Its CEO, Andy Jassy, has become more stringent in company spending, while continuously developing profitable services such as advertising, cloud computing, Prime membership, and third-party markets.
Since the end of 2022, Amazon has laid off over 27000 employees, and the layoffs will continue until 2024. Since the beginning of this year, Amazon has implemented personnel reductions in multiple departments including Twitch, Audible, Buy with Prime, Prime Video, and MGM Studios.
As another major e-commerce platform in Europe and America, eBay's growth is slightly inferior to Amazon's. In fact, in terms of attracting traffic, eBay is inferior to Amazon, Wal Mart, Target and other retailers in recent years, and its market share has been declining; In addition, external factors such as increasingly fierce competition and weak overseas demand pose challenges to eBay's development.
At the beginning of this year, eBay announced a major organizational change plan, which included layoffs of approximately 1000 full-time employees, accounting for 9% of its total full-time employees. Last February, eBay announced the layoffs of 500 employees worldwide, accounting for 4% of its total workforce. Like the layoff wave among American tech giants, eBay's layoffs are also a desperate move to save itself.
Specifically, in the first quarter of this year, eBay's revenue in the first quarter only increased by 2% year-on-year, to $2.556 billion, which is basically the same as the revenue in the fourth quarter of 2023; The net profit attributable to the parent company was 439 million yuan, a year-on-year decrease of 23%; The GMV (total commodity transaction volume) was 18.623 billion US dollars, an increase of 1% compared to the same period last year's 18.41 billion US dollars.
In its financial report, eBay highlighted the impact of the overall environment on performance, namely the decrease in customer traffic in most markets due to geopolitical events, inflationary pressures, foreign exchange rate fluctuations, rising interest rates, and declining consumer confidence, which had a negative impact on disposable consumer spending and partially offset the growth in net income.
Unlike consumer oriented e-commerce platforms such as Amazon and eBay, e-commerce SaaS giant Shopify primarily targets merchants and brand owners, helping businesses establish online stores. In recent years, the trend of branding has become increasingly significant, and the demand for private domain traffic operation by merchants has increased, which has enabled Shopify to expand.
The latest financial report shows that Shopify achieved a revenue of $1.861 billion in the first quarter, a year-on-year increase of 23%, better than the previous market expectation of $1.843 billion; The core revenue comes from two parts: merchant solutions and subscription solutions; The GMV reached $60.9 billion, a year-on-year increase of 23%.
If Shopify's logistics business is deducted, its revenue has increased by 29% year-on-year. Shopify President Harley Finkelstein stated during a earnings conference call that this resulted in revenue excluding logistics increasing by 25% or more for the fourth consecutive quarter in the first quarter of 2024.
Last May, Shopify, which had been attempting to establish a logistics landscape, announced the sale of its platform logistics business Shopify Logistics to logistics company Flexport, while also laying off 20% of its workforce (nearly 2000 employees).
However, due to the sale of logistics business, Shopify expects its gross profit margin to decrease by approximately 50 basis points in the second quarter compared to the first quarter. The company expects its total revenue growth rate to be sluggish in the second quarter, with a year-on-year increase of 15% to 20%. However, in comparison, the average growth rate in the past few quarters has been at least about 26%.
Analysts who invest in US stocks told 21st Century Business Herald that Shopify's core customers are small and medium-sized enterprises, which are more susceptible to the impact of inflation rates and high interest rates. The benefits of Shopify's price increase may be limited.
As a rapidly growing technology company, Shopify's high growth expectations are one of the key factors in its high valuation, and the market is highly sensitive to small changes in growth expectations. After the financial report was released, Shopify's stock price plummeted by nearly 20%.
The performance expectations of Amazon and eBay are also lower than market forecasts. EBay expects its revenue to reach between $2.49 billion and $2.54 billion in the second quarter, lower than the average analyst estimate of $2.56 billion; Amazon expects its second quarter revenue to be between $144 billion and $149 billion, a year-on-year increase of 7% to 11%, lower than the market's expected $150 billion.
Enhance competitiveness
In addition to the less optimistic overall environment, overseas e-commerce giants are facing the impact of outsiders, especially Chinese e-commerce platforms. According to media reports, the "Four Little Dragons" of Chinese e-commerce, Temu, TikTok Shop, Alibaba Overseas E-commerce, and SHEIN, have all raised their transaction volume targets for 2024, with year-on-year growth rates of 233%, 150%, 125%, and 40%, respectively.
Faced with external competitors, Amazon is also seeking to improve its competitiveness in order to regain growth. At the financial report meeting, Amazon emphasized the platform's efforts to continuously improve customer experience.
Firstly, there is the frequent launch of discounted products. Jassy pointed out in a conference call that although customers are actively shopping, they still maintain a cautious attitude when making purchases, always trying to find the best deals and discounts.
He mentioned that in the first quarter, the company helped customers achieve cost savings through shopping events held globally. Specifically, the company has launched its first large-scale spring promotion in Canada and the United States, and also held a spring discount day in Europe. In addition, special promotional activities during Ramadan were also organized in Egypt, Saudi Arabia, and the United Arab Emirates.
Secondly, the key fulfillment efforts in the past year are still continuously improving, and Amazon is shipping to Prime members at the fastest speed in history.
Jassy stated that in the first quarter, Amazon had over 2 billion products delivered globally on the same day or the next day. In March, nearly 60% of Prime member orders were delivered on the same day or the next day in the top 60 largest metropolitan areas in the United States; In London, Tokyo, and Toronto, three-quarters of the goods are delivered on the same day or the next day.
In addition, Amazon is also expanding more categories and providing convenience for merchants. Jassy said during the earnings conference call, "Despite having hundreds of millions of products and the widest range of choices, we are still focused on adding more options." One approach is to make it easier for Amazon third-party sellers to add their products to the market.
Jassy introduced that the company has recently launched an innovative artificial intelligence generation tool aimed at helping sellers improve their online sales efficiency. Specifically, sellers only need to provide their website URL, and the tool can automatically generate detailed and high-quality product detail pages on the Amazon platform. Jassy also mentioned that over 100000 sales partners have started using the GenAI tool series they provide.
Similar to Amazon, Shopify also emphasizes the importance of artificial intelligence, empowering merchants with new AI technologies. Finkelstein said, "Our unique position enables us to tap into the enormous potential of artificial intelligence for entrepreneurship and businesses."
He pointed out that the most practical use of artificial intelligence is to simplify operations and improve productivity. Shopify launched Shopify Magic in January, allowing merchants to use AI to change marketing, conversion, and operational strategies.
"From the end of last year to early January, we achieved significant efficiency improvements in a major marketing channel, and our team created and utilized advanced artificial intelligence and machine learning models, which enabled us to position our target audience with unprecedented precision." Finkelstein said.
He stated that from the fourth quarter of 2023 to the first quarter of 2024, these tools have driven Shopify merchants to increase their advertising volume by nearly 130% while reducing costs.
On the other hand, despite facing challenges from giants, eBay has shifted its focus to breaking through key categories and shifting its business focus to several key areas, including automotive parts, high-end luxury goods, and refurbished electronic products.
The good news is that this strategy of focusing on specific product categories has begun to have a positive impact, and the growth rate of products in these categories has significantly exceeded the growth level of eBay's entire online market in recent quarters. This indicates that eBay's development strategies in these areas are achieving results and may bring new growth drivers to the company.
On April 30th, eBay also announced the establishment of a multi-year partnership with the McLaren Formula One racing team. According to the agreement, the eBay brand will appear in the cars of Lando Norris and Oscar Piastri drivers in the 2024 season.
On the other hand, collectibles remained the main contributor to eBay's sales in the first quarter. "The collection category is eBay's most distinctive category." Pang Tao, eBay's General Manager of Sales and Category Management in Greater China, previously stated in an interview with 21st Century Business Herald that elements such as star cards, figurines, anime, and IP are very important growth points for eBay, achieving triple digit growth last year.
In April of this year, eBay acquired the sports collectibles website Goldin Auctions from Collectors.
In the eyes of industry insiders, the actions of various giants reflect their flexibility and innovative ability to seek new growth opportunities in a constantly changing market environment. However, although these new attempts have great potential, it is still uncertain whether they can sustain the overall performance.
For enterprises, facing the continuous progress of technology and the evolution of consumer demand, their ability to adapt, transform, and maintain growth will determine whether they can maintain a leading position in the global e-commerce market.